North America: CalPERS seeks legal support to help exit funds

18 July 2018 - 12:00 am UTC

The California Public Employees’ Retirement System (CalPERS) has issued an RFQ to partner with legal firms to assist in “work-out” situations involving their existing investments. This could include funds geared around infrastructure, private equity, trust level and opportunistic strategies, according to the solicitation.

The institutional investor in the RFQ stated they are finding themselves in situations where “a general partner may be underperforming or there may be a key-person event and CalPERS may want to explore and exercise its exit options. More severely, a general partner may be breaching the contract or its fiduciary duties to the limited partners. For instance, a general partner may try to escape its claw-back obligations. In these situations, CalPERS is often in need of legal advice to help navigate the partnership documents.”

CalPERS’ current counsel contracts expire 31 December 2018, and the new resulting contracts will be for a five-year term beginning 1 January 2019. The solicitation is available to view here.

The investor’s USD 4.6bn infrastructure portfolio constitutes approximately 1.2% of their entire USD 356.82bn portfolio.

The pension so far has made commitments to 13 infrastructure and energy funds, according to Inframation Deals. Those funds in Calpers infrastructure portfolio include Alinda Infrastructure Fund I & II, Carlyle Infrastructure Partners, Global Infrastructure Partners II, North Haven Infrastructure Partners II, and others.

Arclight Energy Partners Funds III & IV and Hudson Clean Energy Partners were part of Calper’s private equity portfolio. All of CalPERS infrastructure activity is available on their Inframation Deals investor profile here.

As previously reported, CalPERS is pursuing a new infrastructure investment strategy primarily focused on managed account and secondarily focused on direct investments. The USD 356.82bn institutional investor announced on 12 July that its USD 4.6bn infrastructure portfolio is its highest-performing asset class, generating a 20.6% net return for the 2017-2018 fiscal year.

The retirement system maintains several equity interests in infrastructure assets internationally, with stakes in the UK-based Gatwick Airport (12.78%), Indiana Toll Road (10%), and Port of Melbourne (10%).